February 3, 2010

 

CBOT Soy Review on Tuesday: Oversold conditions spark technical bounce

 

 

Soy futures at the Chicago Board of Trade climbed Tuesday, staging a technical recovery from four-month lows on oversold conditions and supportive signals from outside markets.

 

CBOT March soy ended 15 3/4 cents or 1.73% higher at US$9.25 1/2, and May soy settled 15 3/4 cents or 1.71% higher at US$9.36 1/2.

 

Speculative funds were estimated buyers of 6,000 lots in soy, 1,000 lots in soymeal, and 2,000 lots in soyoil.

 

The market was able to achieve a needed bounce after it developed oversold market conditions in a month-long price slide, said Jack Scoville, analyst with Price Futures Group.

 

The market had been slammed enough, with the bearish features of record South American production and the fear of China shifting demand from the U.S. to the Southern Hemisphere growing stale following a nearly US$1.50 break in prices, said Scoville.

 

Futures also found price support from outside influences, with a weaker U.S. dollar index, higher crude oil, metal futures and equities providing participants with confidence to buy into a market in a downtrend.

 

Technical buying added to the bullish tonnee, with the inability of futures to challenge the psychological US$9.00 support level and subsequent rise above Monday's highs triggering pre-placed buy orders, analysts said.

 

Traders will look for follow-through buying to emerge overnight and Wednesday before classifying the higher action as anything more than a modest short-covering bounce.

 

The ability of futures to extend the climb will indicate a short-term bottom in the market and a signal that traders are cautious of pressing prices below major support levels, said Scoville.

 

"The market's bearish case revolves around the anticipation of huge South American supplies in April and May," said Scoville. "However, until the crop is out of the ground and in exportable locations, it may be bit early to legitimately press prices below near term chart support at US$9.00."

 

 

Soy Products

 

Soy-product futures rallied Tuesday, climbing in unison with a bounce in soy. Soyoil futures were the upside leader of the products, continuing to garner product-value share on spreads. Spillover support from sharp gains in crude oil futures served as an added incentive to attract buyers, lifting futures to two-week highs, a CBOT floor analyst said.

 

Soymeal futures rose in step with advances in soy, consolidating off four-month lows. However, soaring soyoil values and weakening U.S. and South American cash basis levels applied pressure to cap upside potential, analysts said.

 

March soymeal settled at US$1.80 or 0.66% higher at US$273.60. March soyoil rose 128 points or 3.54% to 37.47 cents per pound.

 

March oil share was 40.67% while the March soy crush ended at 89 1/2 cents.